q2 2016 financial resultss21.q4cdn.com/603930022/files/doc_presentations/... · q1'14...

™ Trademark of Trinseo S.A. or its affiliates

Q2 2016Financial Results

August 2, 2016


Introductions & Disclosure Rules

Disclosure RulesCautionary Note on Forward-Looking Statements. This presentation contains forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts or guarantees or assurances of future performance. Forward- looking statements may be identified by the use of words like “expect,” “anticipate,” “intend,” “forecast,” “outlook,” “will,” “may,” “might,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would” or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statementsrelate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Factors that might cause such a difference include, but are not limited to, those discussed in our Annual Report on Form 10-K, under Part I, Item 1A — “Risk Factors” and elsewhere in that report. As a result of these or other factors, our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you against relying on any of these forward-looking statements. The forward-looking statements included in this presentation are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the US (“GAAP”) including Adjusted EBITDA, Adjusted EBITDA excluding inventory revaluation, Adjusted Net Income (loss), and Adjusted EPS - Diluted. We believe these measures provide relevant and meaningful information to investors and lenders about the ongoing operating results of the Company. Such measures when referenced herein should not be viewed as an alternative to GAAP measures of performance. We have provided a reconciliation of these measures in the Appendix section of this presentation.

Introductions• Chris Pappas, President & CEO• Barry Niziolek, Executive Vice President & CFO• David Stasse, Vice President, Treasury & Corporate Finance

2

2015 Sustainability HighlightsSUSTAINABLE PRODUCTS

Potential density reduction with Trinseo PULSETM XT7215 versus alternative solution

10%

Reduction in energy consumption using an LED bulb with Trinseo plastic lens, compared to incandescent light

75%

Reduction in fuel consumption when

using low rolling resistance tires with

SSBR rubber

3%

Packaging made with STYRONTM

polystyrene can reduce food waste

1 in 4SUSTAINABLE PERFORMANCE

Reduction in waste of 17% (vs. prior year)

17%

Reduction in emissions of volatile organic chemicals (VOCs)

(from 2011 baseline)

50%

Reduction in totalchemical emissions (from 2011 baseline)

18%

Reduction in electricity use

(from 2011 baseline)

4%

Percent of Trinseo teams with Triple Zero record: no injuries, no

significant spills, no process safety incidents

73%

Percent of Trinseo employees who

completed ethics and compliance training

96%

Percent of Trinseo plants with ISO

14001 certification

58%

Percent of Trinseo sites with ISO 50001

certification

27%

SUSTAINABLE OPERATIONS

3

Key Points

Q2 2016 Adjusted EBITDAex Inventory Revaluation

$169MM• Record performance• Solid Performance Materials EBITDA• BP&F benefit from styrene planned

turnarounds

Full Year 2016 Guidance$605MM - $615MM

Adjusted EBITDA ex Inventory Reval• Minimal inventory revaluation expected• Free cash flow expected to be $320 million

excluding working capital impacts

Q2 2016Free Cash Flow

$68MM• Record cash balance and total liquidity• $37MM spent on share repurchases

Q3 2016 Guidance$140MM - $150MM

Adjusted EBITDA ex Inventory Reval• Minimal inventory revaluation expected• Styrene margins close to Q1 levels after

spring turnaround season in Q2Gui

danc

eR

esul

ts

4

• Continued business optimization – divestiture of Brazil operations• Share buybacks

• Approximately 800,000 shares repurchased• Approximately 2.4 million shares repurchased YTD (5% of outstanding shares)• Board of Directors approved additional $100 million repurchase as part of the

total 4.5 million shares approved by shareholders over next 2 years

• Initiated a $0.30 per share quarterly cash distribution

Performance MaterialsNet Sales: $528MM

Adj EBITDA: $83MMAdj EBITDA ex Reval: $76MM

Basic Plastics & FeedstocksNet Sales: $442MM


Synthetic RubberNet Sales: $111MM

Adj EBITDA: $30MM

LatexNet Sales: $232MM

Adj EBITDA: $21MM

Performance PlasticsNet Sales: $184MM

Adj EBITDA: $31MM

Note: Division and Segment Adjusted EBITDA excludes Corporate Segment Adjusted EBITDA of ($21)MM. Totals may not sum due to rounding.

Q2 2016 Net Sales: $970MMNet Income: $96MM


Adj EPS: $2.30

Q2 2016 Highlights

5

Trinseo Q2 2016 Financial Results

$970$1,029

Q2'16 Q2'15

Revenue ($MM)

Vol Price FX Total1% (8%) 2% (6%)

$182 $169$151

$122

Adj EBITDA Adj EBITDA ex Reval

Adjusted EBITDA ($MM)

Q2'16 Q2'15

• Record Net Income, EBITDA and EPS performance• $600 million Adjusted EBITDA excluding inventory revaluation in

LTM period

$2.00$2.30

$0.02

$1.61

EPS Adj EPS

EPS ($)

Q2'16 Q2'15

6

Latex

$232$248

Q2'16 Q2'15

Revenue ($MM)

$21

$15

Q2'16 Q2'15

Adjusted EBITDA ($MM)310 312

Q2'16 Q2'15

Volume (MM Lbs)

Vol Price FX Total(1%) (7%) 1% (6%)

• Volume consistent with historical levels

• Approximately $5MM negative price lag impact in Q2

• Recent price increases and cost reductions reflected in results

7

Synthetic Rubber

• Continued strong high-performance tire market

• SSBR sales volume was the second highest quarter on record

$111 $115

Q2'16 Q2'15

Revenue ($MM)

$30

$18

Q2'16 Q2'15

Adjusted EBITDA ($MM)

148 153

Q2'16 Q2'15

Volume (MM Lbs)

Vol Price FX Total(2%) (4%) 3% (3%)

8

Performance Plastics

• Continued strong performance• Record quarterly sales volume in automotive

$184 $185

Q2'16 Q2'15

Revenue ($MM)$31

$21

Q2'16 Q2'15

Adjusted EBITDA ($MM)154 150

Q2'16 Q2'15

Volume (MM Lbs)


9

Basic Plastics & Feedstocks

• Record Adjusted EBITDA excluding inventory revaluation of $115 million in 2016 versus $99 million in prior year

• Sustained, higher level of profitability with strong performance across styrene, styrenicpolymers, and polycarbonate

$442$480

Q2'16 Q2'15

Revenue ($MM)$121 $122

Q2'16 Q2'15

Adjusted EBITDA ($MM)734

539

708

557

Segment Volume Polymer Volume

Volume (MM Lbs)

Q2'16 Q2'15


10

$465

$439

Q2'16

$170

$25

$247

$344

$56

$69

2013 2014 2015 Q2'16 LTM

Balance Sheet and Cash Flow

Liquidity ($MM)

Net Leverage(3)

(1) Free Cash Flow = cash from operating activities + cash from investing activities – change in restricted cash. 2015 value of $316MM excludes a call premium of approximately $69MM. 2014 value of $81MM excludes approximately $56MM of termination fees for Latex JV Option and Bain Advisory Agreement.

(2) A/R Securitization facility commitment of $200MM ($130MM available at Q2’16) and Revolving Credit facility commitment of $325MM ($309MM available at Q2’16). NOTE: Totals may not sum due to rounding.(3) Net Leverage = (Total Debt – Cash & Cash Equivalents) / LTM Adjusted EBITDA

Summary• Q2 cash from operating activities of $95 million and

free cash flow of $68 million• Q2 dividends of $30 million from Americas Styrenics• Net leverage of 1.3x at quarter end

Unused Borrowing Facilities(2)

Cash & Cash Equivalents

Free Cash Flow ($MM) (1)

$81

Call premium related to refinancing

$904

$316

4.1x 3.8x

1.6x 1.3x

2013 2014 2015 Q2'16 LTM

11

400 600 800

1,000 1,200 1,400 1,600 1,800 2,000

Styr

ene

Mar

gin

-USD

/MT

USD

/MT

400 600 800

1,000 1,200 1,400 1,600 1,800 2,000 2,200

Styr

ene

Mar

gin

-USD

/MT

USD

/MT

Western Europe and Asia Styrene Margin Trends

Western Europe Margin

Asia Margin

Q2 to Q3-$25/MT

Q2 to Q3-125$/MT

Source: IHS/Trinseo. (1) Styrene: W. Europe Contract Monthly Market (Delivered W. Europe); Benzene: 50% W. Europe Spot Avg (CIF NW Europe / Basis ARA) and 50% W. Europe Contract – Market (FOB/CIF W. Europe); Ethylene: W. Europe Contract – Market Pipeline (Delivered W. Europe). (2) Styrene: NE Asia Avg Spot Posting (CFR China); Benzene: NE Asia Spot Avg (FOB S. Korea); Ethylene: NE Asia Spot Avg (CFR NE Asia). Margin: Styrene less 80% * Benzene less 30% * Ethylene.

Styrene

EthyleneBenzene

SM Margin

Styrene Ethylene

Benzene

SM Margin

12

Q3 2016 ExpectationsPe

rfor

man

ce M

ater

ials

Synthetic Rubber

Latex

Performance Plastics

Price increases implemented

Cost initiatives continuing

Very strong high-performance tire market

Higher Q3 volume vs. Q2

Lower automotive volume due to seasonality


Corporate

Styrene margins more in line with Q1

Strong styrenic polymer and polycarbonate margins continuing

Consistent JV performance

Adj EBITDA ex inventory reval $140MM - $150MM / Adj EPS $1.55 - $1.70Assumes minimal inventory revaluation

~$25

$85 - $95

Adj EBITDA ex Reval ($MM)

~$(22)

~$25

~$25

13

Increasing 2016 Expectations


Corporate

YoY structural improvement in styrene margins

Continued strong polystyrene and ABS margins

Continued healthy polycarbonate margins

Solid JV performance

Consistent with recent levels

Performance Materials

At least 5% Adjusted EBITDA growth Realization of Latex actions

Continued strong volume and margin in Synthetic Rubber (no significant

turnarounds)

Modest growth in Performance Plastics

Free Cash Flow(ex ∆ in working capital)

~ $75MM cash interest

~ $65MM cash taxes

~ $150MM capital expenditures

Adj EBITDA ex Reval ($MM)

~$395

~$(90)

~$320

$300 - $310

Adj EBITDA ex inventory reval $605MM - $615MM / Adj EPS $6.95 - $7.10Assumes minimal inventory revaluation

14

Bridging to 2016 Guidance

$550 $610

($60)

+$20

+$100

2015 Adj EBITDA excl InvRevaluation

2015 Fly-up StyreneMargin

Performance Materials>5% Growth

BP&F StructuralImprovement

2016 Adj EBITDA excl InvRevaluation (Guidance

Midpoint)

Adj EBITDA excl Inventory Revaluation ($MM)

15


Q&A


Appendix

US GAAP to Non-GAAP Reconciliation

NOTE: Totals may not sum due to rounding.

Third Quarter and Full Year 2016

Three Months Ended Year Ended

(In millions, except per share data) September 30,

2016 December 31,

2016 Adjusted EBITDA excluding inventory revaluation $ 140 - 150 $ 605 - 615 Interest expense, net (20 ) (76 ) Provision for income taxes (21) – (24 ) (94) – (97 ) Depreciation and amortization (26 ) (102 ) Reconciling items to Adjusted EBITDA — (17 ) Net Income 73 - 80 316 - 323 Reconciling items to Adjusted Net Income — 17 Adjusted Net Income 73 - 80 333 - 340 Weighted average shares- diluted 47.3 47.9 Adjusted EPS $ 1.55 - 1.70 $ 6.95 – 7.10

18

US GAAP to Non-GAAP Reconciliation


(in $millions, unless noted) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 2013 2014 2015Net Income (Loss) 17.1 (44.6) (10.1) (29.7) 37.7 0.8 52.1 43.1 76.7 95.8 (22.2) (67.3) 133.6

Interest expense, net 32.8 32.6 30.1 29.4 28.9 25.6 19.5 19.3 18.9 18.8 132.0 124.9 93.2Provision for (benefit from) income taxes 12.8 5.5 3.7 (2.1) 17.9 7.5 21.2 23.6 21.9 28.6 21.8 19.7 70.2Depreciation and amortization 23.7 27.1 27.8 24.9 22.5 21.7 23.0 29.5 23.2 24.9 95.2 103.7 96.8

EBITDA 86.4 20.6 51.5 22.5 107.0 55.6 115.8 115.5 140.7 168.1 226.8 181.0 393.8

Loss on extinguishment of long-term debt - - 7.4 - - 95.2 - - - - 20.7 7.4 95.2Other items - 32.5 1.9 3.9 1.3 0.6 0.3 - 1.8 0.3 0.8 38.4 2.2Restructuring and other charges 0.5 2.1 0.8 6.6 0.5 (0.1) 0.1 0.2 0.7 1.1 10.8 10.0 0.8Net (gains) / losses on dispositions of businesses and assets - - - (0.6) - - - - - 12.9 4.2 (0.6) -Fees paid pursuant to advisory agreement 1.2 24.2 - - - - - - - - 4.7 25.4 -Asset impairment charges or write-offs - - - - - - - - - - 9.9 - -

Adjusted EBITDA 88.1 79.4 61.6 32.4 108.8 151.3 116.2 115.7 143.2 182.4 277.9 261.6 492.0Inventory Revaluation (5.6) (2.6) 0.8 71.8 42.1 (29.4) 28.3 17.3 9.7 (12.9) 40.4 64.4 58.3

Adjusted EBITDA Ex Inv Reval 82.5 76.8 62.4 104.2 150.9 121.9 144.5 133.0 152.9 169.5 318.3 326.0 550.3

Adjusted EBITDA to Adjusted Net Income Adjusted EBITDA 88.1 79.4 61.6 32.4 108.8 151.3 116.2 115.7 143.2 182.4 277.9 261.6 492.0

Interest expense, net 32.8 32.6 30.1 29.4 28.9 25.6 19.5 19.3 18.9 18.8 132.0 124.9 93.2Provision for (benefit from) income taxes - Adjusted 12.0 10.1 5.4 1.8 18.3 25.5 22.3 18.7 22.4 28.8 28.4 29.4 84.9Depreciation and amortization - Adjusted 23.7 25.8 25.6 24.5 22.3 21.6 22.1 23.4 22.6 24.9 95.2 99.6 89.3

Adjusted Net Income 19.6 10.9 0.5 (23.3) 39.3 78.6 52.3 54.3 79.3 109.9 22.3 7.7 224.6Wtd Avg Shares - Diluted (000) 37,270 38,912 50,063 48,770 48,851 48,907 48,989 49,067 49,086 47,857 37,270 43,476 48,970Adjusted EPS - Diluted ($) 0.53 0.28 0.01 (0.48) 0.80 1.61 1.07 1.11 1.62 2.30 0.60 0.18 4.59

Adjustments by Statement of Operations CaptionLoss on extinguishment of long-term debt - - 7.4 - - 95.2 - - - - 20.7 7.4 95.2Selling, general and administrative expenses 1.7 26.3 2.7 10.5 1.8 0.5 0.4 0.2 2.5 1.4 25.5 41.3 3.0Other expense (income), net - 32.5 - (0.6) - - - - - 12.9 4.9 31.9 -

Total EBITDA Adjustments 1.7 58.8 10.1 9.9 1.8 95.7 0.4 0.2 2.5 14.3 51.1 80.6 98.2

19

Selected Segment Information


(in $millions, unless noted) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 2013 2014 2015 Q2'16 LTMLatex 299 295 309 289 305 312 307 308 299 310 1,210 1,193 1,233 1,225Synthetic Rubber 155 142 136 135 162 153 152 134 146 148 523 568 601 580Performance Plastics 144 147 145 145 150 150 144 146 143 154 579 581 590 587

Performance Materials 598 584 591 569 617 616 603 588 588 613 2,312 2,342 2,423 2,392Basic Plastics & Feedstocks 746 743 725 654 793 708 724 690 764 734 2,810 2,867 2,915 2,911

Trade Volume (MMLbs) 1,344 1,327 1,315 1,223 1,411 1,323 1,327 1,277 1,352 1,347 5,122 5,210 5,339 5,303

Latex 326 321 328 286 238 248 255 226 209 232 1,341 1,261 966 922Synthetic Rubber 177 165 155 137 129 115 126 104 102 111 622 634 475 443Performance Plastics 202 210 208 202 197 185 180 181 169 184 808 821 743 713

Performance Materials 705 695 691 624 565 548 561 510 480 528 2,771 2,716 2,184 2,079Basic Plastics & Feedstocks 654 645 614 498 454 480 467 387 414 442 2,536 2,412 1,788 1,710

Net Sales 1,359 1,341 1,305 1,122 1,018 1,029 1,028 897 894 970 5,307 5,128 3,972 3,789

Latex 26 27 26 18 21 15 24 18 19 21 106 97 79 83Synthetic Rubber 43 37 27 30 26 18 27 21 23 30 113 137 93 102Performance Plastics 17 17 19 16 25 21 15 22 30 31 62 69 83 97

Performance Materials 87 81 72 65 73 55 66 61 72 83 281 304 255 282Basic Plastics & Feedstocks 23 16 4 (12) 59 122 70 75 97 121 103 31 327 363Corporate (21) (17) (15) (20) (23) (25) (21) (20) (25) (21) (107) (73) (90) (87)Adjusted EBITDA 88 79 62 32 109 151 116 116 143 182 278 262 492 557

Performance Materials 82 80 73 85 93 48 72 71 77 76 304 319 284 295Basic Plastics & Feedstocks 22 13 4 40 81 99 93 83 101 115 121 79 356 392Corporate (21) (17) (15) (20) (23) (26) (21) (20) (25) (21) (107) (73) (90) (87)Adjusted EBITDA excl Inv Reval 83 77 62 104 151 122 144 133 153 169 318 326 550 600

Basic Plastics & Feedstocks 15 5 9 18 37 41 33 29 35 39 39 48 140 136Equity in earnings (losses) of affiliates 15 5 9 18 37 41 33 29 35 39 39 48 140 136

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